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Monday, May 07, 2007

"It's All A Currency Play"

MarketWatch reports on the markets. "Gold futures advanced on Monday to mark a three-session win of more than $15 an ounce as the U.S. dollar fell against other major currencies, underpinning demand for the precious metal. For this week, 'it's all a currency play,' said Neal Ryan, director of economic research at Blanchard. 'With the Europeans and Asian central banks continuing to raise rates while the Fed is in no position to do the same,' gold and, to a smaller extent, silver are 'becoming great currency plays.'"

"Gold for June delivery gained 70 cents to close at $690.40 an ounce on the New York Mercantile Exchange. The contract closed below the day's high of $693.20, but it's tallied a $15.30, or 2.3%, gain in three trading sessions."

"The dollar fell against other major currencies but stayed in narrow ranges Monday, as investors awaited central-bank meetings on interest rates in the U.S. and Europe later in the week."

"'Precious metals and the dollar index will be very volatile on interpretation of the language in the Fed statement, but we believe that after the news is digested and the ECB/Bank of England raise rates on Thursday, the dollar should come under renewed pressure to the downside while precious metals enjoy the bounce,' said Ryan."

"'This week should go a long way toward underscoring the importance of gold and silver trading as currency alternatives,' Ryan said. For now, he said he's 'waiting to see if today or tomorrow we challenge the $694-$695 resistance level that a lot of analysts have pegged as the major resistance point right now.'"

"'If we reach and eclipse that level before the Fed meeting and get some dollar-negative news out of the Fed this week, I think we'll finally be up and over the $700 and off to test the $730 high in a flash,' Ryan said."

"Also on the Nymex Monday, July silver rose 11 cents to close at $13.64 an ounce, July platinum gained 1.7%, or $22.10, to finish at $1,350.90 an ounce and June palladium rose $2.20 to close at $379.20 an ounce."

"Crude futures fell Monday to close at their lowest level in almost seven weeks, tallying a loss of more than 7% during a losing streak that's spanned six sessions. Traders were betting that U.S. data, due later this week, will reveal ample supplies of crude and gasoline inventories may have even declined."

"Crude oil for June delivery fell 46 cents, or 0.7%, to close at $61.47 a barrel on the New York Mercantile Exchange after a low of $60.90. The contract hasn't traded or closed at a level this low since March 21."

"It 'looks like some [supply] estimates have builds or only small draws likely this week,' said Jason Schenker, an economist at Wachovia Corp. 'That price is bearish.'"

From Bloomberg. "Central bank officials are not the only people distressed by lax lending standards. Even the deal makers who depend on low-cost financing with few strings attached are complaining that money is too cheap and there are not enough strings."

"'There's too much liquidity in the system,' Philip Yea, chief executive of the largest publicly traded venture-capital and buyout firm in Europe, said last month. 'There's too much debt available.'"

"Steve Rattner, co-founder of Quadrangle Group, a buyout firm, said in January that 'the world isn't pricing risk appropriately. Investors are simply not being paid for the risks they're taking.'"

"Larry Fink, chief executive of BlackRock, a fund manager based in New York, said the subprime debacle had had a domino effect on the rest of the credit market - just not the one you might have expected."

"'We're seeing fewer investments in subprime, but that money needs to be put to work so they're going into other credit markets,' said during a recent interview with The Financial Times. 'Historically, when we've seen one problem, we've seen an adjustment throughout the marketplace. We've seen no indication of that yet. We've seen the actual opposite.'"